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Guides to Credit Repair

Why Credit Repair Companies Have Such a Bad Reputation

Posted on December 12, 2010

When you hear or read about credit repair companies from “reputable” sources, you usually see these sources warning you against credit repair. They tell you not to hire credit repair companies and that you’re better off repairing credit on your own. Why have credit repair companies been made into villains? Because many of them are villains.

In 2008, the Federal Trade Commission (FTC) shutdown 33 credit repair companies because these companies violated Federal laws for credit repair companies. When the FTC sues these companies it’s usually because they’ve been making false claims, not delivering on their promises, and taking money from customers upfront. These are all illegal for credit repair companies to do.

It’s Easy to Start a Credit Repair Company

Anyone can start a credit repair company. While there are Federal laws stating what credit repair companies can do once they’re operating, there are no laws or requirements for any individual or company to start doing credit repair. The internet makes it easy for someone to start a credit repair company without even getting a state business license or training.

So Many Credit Repair Scams

If no one was ever scammed by a credit repair company, there wouldn’t be so many warnings against using these companies. But, the complaints have been so numerous that the FTC has had to step in to protect consumer rights. Because it’s so easy to start a credit repair company, especially online, it’s easy for those companies to take money from consumers then disappear. Or, to do minimal effort on improving credit then say “We did what we said we’d do.” The bad companies out there have given the credit repair industry a bad reputation.

You Can Do It Yourself

Many sources who recommend against hiring a credit repair company tell you it’s pointless to pay money for these services because you can do them yourselves. Credit repair companies often use the credit report dispute process to remove information from your credit report. You can send those same dispute letters and save yourself hundreds of dollars.

Hiring a Credit Repair Service

Some people don’t have the time to understand the credit repair process, so they pay a credit repair company instead. Hiring a credit repair company isn’t a bad thing, but since there are so few trustworthy companies, you’re taking a gamble when you put your faith in one of these companies.

If you don’t want to take the time to understand how credit repair works, you should at least research laws regarding credit repair companies. It’s the only way to make sure your rights are protected and that you’re not taken advantage of. For example, you don’t have to pay a credit repair company until it’s performed the services that were promised. You also have three days to cancel your contract with a credit repair company if, for example, you find out the credit repair company isn’t reputable.

You can forward problems with credit repair companies to the FTC via FTC.gov. If the agency receives enough complaints about that company, they will shut it down.